BioTelemetry's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.26.14 | About: BioTelemetry, Inc. (BEAT)

BioTelemetry, Inc. (NASDAQ:BEAT)

Q4 2013 Earnings Conference Call

February 24, 2014 5:00 p.m. ET

Executives

Joseph Capper – President and CEO

Heather Getz – CFO

Analysts

Brooks O'Neil - Dougherty and Company

Alex Silverman - Special Situations Fund

Jan Wald – Benchmark

Bruce Jackson - Lake Street Capital

Dan Trang - Stonegate Securities

Operator

Good afternoon. Thank you for joining us for the Biotelemetry’s Fourth Quarter 2013 Earnings Conference Call. Certain statements during the conference call and question-and-answer period to follow may relate to future events and expectations, and as such constitute forward-looking statements within the meaning of the Private Securities and Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company in the future to be materially different from the statements that the company’s executives may make today.

These risks are described in detail in our public filings with the Securities and Exchange Commission, including our latest periodic report on Form 10-K or 10-Q. We assume no duty to update these statements. (Operator Instructions)

It is now my pleasure to turn the floor over to your host, Mr. Joseph Capper. Sir, you may begin.

Joseph Capper

Thank you, operator and good afternoon everyone. I am Joe Capper, President and CEO BioTelemetry. Also with me on the call today is our Chief Financial Officer Heather Getz. I will provide commentary on our fourth quarter performance. Heather will take you through a more detailed review of our operating results. And we will then open the call to your questions.

I am excited to be with you this afternoon to report on another highly successful and productive quarter during which we made considerable progress executing against our strategic objectives and delivering our sixth consecutive quarter of year-over-year growth capping off an excellent 2013.

In the fourth quarter 2014 we experienced year-over-year revenue growth of 11% to $33 million, our best quarter of the year. EBITDA was $4.4 million, $5.2 million with stock comp added back, the highest quarterly EBITDA in over four years.

Total volume was up 16% compared to last year with MCOT volume up 14%. Volume in the period was our highest quarterly volume in the company's history quarter. And we ended the quarter with over $22 million in cash. In addition to these excellent financials, the quarter was filled with considerable operational success despite a few challenges.

Those of you who have followed us have heard me outline our company's strategic objectives on previous calls so the investment community can better understand how we manage the business. I would like to do that again today, so you can measure just how successful we were this quarter executing on those objectives which are as follows:

First, we seek to solidify our leadership position in cardiac monitoring. Second, we want to establish a leading research services business around Cardiocore brand and platform; and third, we look to identify diagnostic markets that would benefit from the application of our wireless platform and proprietary technology. I am pleased to report this quarter we've made progress towards all of these objectives.

As you will hear, we further expanded our leadership position in patient services, improved operations at Cardiocore and furthered our progress in leveraging our wireless technology platform.

Let’s start with patient services. You may recall back in November, Medicare announced the final coverage rules for 2014 resulting in an approximate 14% rate reduction or roughly $5 million. After the cut was announced, we communicated that we expect it to offset nearly half of the decrease through expense reduction and that we remain focused on our growth oriented agenda. I'm pleased to report that our goal on the cost side has been achieved and we have made tangible progress on our growth plan as evidenced by the recently announced acquisition of Mednet.

At the end of January, the patent litigation we had been pursuing against Mednet culminated with a structured settlement, including an admission of infringement and sale of Mednet to BioTelemetry. As I said in the press release at the time of closing, this was rather an unorthodox way of getting to a merger of this kind. Nonetheless the result was an extremely positive one. Not only does the outcome validate the value and strength of our patent portfolio, we expect the acquisition to generate an additional $25 million in annual revenue, and approximately $4 million to $5 million in EBITDA.

In addition to being in line with our strategic intent to strengthen our leadership position in cardiac monitoring, consolidation of similar businesses becomes more relevant in a tight reimbursement environment. As we integrate Mednet and Biotelemetry patient services, our primary objective is customer retention. As such we must keep in mind that Mednet was able to build a fairly sizable business with a product that is clearly not as technologically advanced as MCOT. They did this by providing excellent customer service and adhering to set of principles built around patient needs. This presents a rare opportunity to infuse superior customer service values with market-leading technologies and build a far more formidable organization in the process. An opportunity that will not be missed.

We see roll-up acquisition like the Mednet deal as a great way accelerate our growth plan and we have the capacity to do more. Furthermore, market share expansion in advance of launching the next generation mobile telemetry system will help drive rapid market acceptance when the product clears the development and regulatory processes. Additionally this increased share will allow for quicker penetration as insurance companies expand coverage for MCOT.

I was very pleased with the resilience of the company to work through the impact of Medicare rate reduction. We maintain our focus on the day-to-day operations within [indiscernible] depth and strength of our patient services business. Specifically the patient services business was [indiscernible] during the quarter by the continued pull through of the United agreement and the implementation of the Kaiser contract. We also continue to make progress communicating the clear cost-saving benefits of our remote monitoring services, particularly MCOT throughout the rest of the third party payer market. This effort was enhanced with the publication of the claims data analysis we have spoken about in the past.

During the quarter, we entered into 14 new payer agreements and amendments adding new and existing services, including INR. This is consistent with our strategy to provide a complete solution for cardiac monitoring and related services. I am pleased to report that Blue Cross/Blue Shield Arizona and Blue Cross/Blue Shield of Louisiana now cover our MCOT service for all their members, strengthening our position within the Blue’s network.

Also, we made excellent progress in our plans to launch our 14 day [indiscernible] which received FDA clearance last quarter and our next-generation telemetry product currently in development with our partner IMEC, a worldwide leader in nano-electronics. In recent years you've noticed that BioTelemetry has diversified both within patient services driven by the comprehensive CardioNet initiative and entered other sectors like research services.

We have recently put increased emphasis on completing the strategic initiatives for research services which are to enhance our position outside of the US, particularly in Europe and Japan, add services to complement the current core [ph] lab offering and create a competitive advantage in terms of costs [ph] and differentiation.

On the first two points, we expect soon to be completing a few projects and moving them into an operational status. These are welcome advancements that will improve our competitiveness in this large and growing market. We remain excited about the business and expect research services to be a positive contributor to our growth in 2014.

I will update you on our third strategic objective – to develop new market opportunities for our wireless platform in my closing comment. And with that I will now turn the call over to Heather for a detailed financial review of the quarter. Heather?

Heather Getz

Thank you, Joe and good afternoon everyone. As Joe mentioned 2013 was a great year for BioTelemetry. We posted revenue of $130 million for the full year and capped off 2013 with fourth quarter revenue of $33 million, an 11% increase over the fourth quarter of 2012. This was due to a $4 million increase in our patient services business, resulting from 16% higher volume largely driven by MCOT and WEvent.

The additional volume can be attributed to the United Healthcare contract and the growing success of our 2:1 and Wireless Event devices. Partially offsetting this increase was lower Q4 revenue in our product and research segment.

Fourth quarter gross margin came in at 63 percentage points compared to 57% in the prior year quarter. The increase in gross margin was primarily due to a higher percentage of our revenue coming from our patient services segment which carry a higher margin. Also contributing to the increase were efficiency gains in the patient services business as well as leverage from the increased revenue.

For the fourth quarter, our adjusted operating expense decreased slightly to $19.2 million, while our bad debt expense decreased $1 million. This was partially offset by higher research and development expense due to the work being done by IMEC on our next generation device and increased depreciation.

With the increased margin dollars stemming from the higher revenue and lower operating expense, we generated positive adjusted EBITDA of $5.2 million for the fourth quarter 2013, a 15.8% return, compared to $1.7 million in Q4 2012. Our fourth quarter EBITDA increased sequentially and is the highest EBITDA in four years. Also, worth nothing on an adjusting basis, we were operating income positive for the third consecutive quarter and on a year to date basis. Again this has not occurred since 2009. In Q4 we also generated positive GAAP operating income for the first time since 2008.

Now turning to the balance sheet. We ended the quarter with $22.2 million in cash which was up $3.9 million compared to 2012. For the full year we generated $11.3 million in cash from operations which was partially used to invest in new devices as well as our new operating system, bringing us to free cash flow positive up $3.1 million. We continue to make progress on reducing our accounts receivable causing our consolidated DSO to decline to 47 days, a 14 day decline from year end 2012.

Finally before I turn the call back to Joe, I would like to touch on the coming year. Coming off a strong 2013, we expect to see continued momentum in our overall business led by volume growth in patient service segment, which will be bolstered by the acquisition of Mednet. Offsetting the impact of this volume growth will be previously announced Medicare rate reduction which we expect to have a $5 million negative impact to our top and our bottom line.

As Joe mentioned we believe that we will be able to make up this negative impact through certain cost reductions and with the addition of Mednet. On the other side of our business, research services did not grow as we had expected in 2013. As a result, we have made several operational changes and have accelerated our efforts to add additional service lines and establish a greater presence in Europe which we believe will enable us to reignite our growth in this very attractive market.

For the overall company, we are looking at top line growth of 20 plus percent for 2014 and an EBITDA with a slightly lower percentage return than we realized in 2013 due to the Medicare reduction, but higher than 2013 in terms of absolute dollars.

Now to focus specifically on Q1. As is typical, our expenses tend to be higher in Q1 in part due to the timing of certain sales meetings and payroll taxes. This year, our results will also be negatively impacted by the Medicare reductions that went into effect on January 1. The addition of Mednet in the quarter will offset the impact of the rate reduction on revenue in Q1. However on the EBITDA side, despite the addition of Mednet and the measures that we put in place to mitigate the cut, we expect to see a reduction as compared to Q4, which is again not a typical in our business.

In addition, our cash balance typically declined due to the higher expenses as well as payment of management incentive bonuses and prepayment of other expenses. To reiterate, for 2014 on a consolidated basis we expect top line growth of 20 plus percent, EBITDA to increase in terms of absolute dollars for the full year and to generate cash from operations.

And with that, I will now turn the call back over to Joe.

Joseph Capper

Thank you, Heather. As you have heard, there have been considerable activities and progress in our business over the last year. I want to focus a bit more now on how we plan to build on this momentum.

Given our overarching vision of being a worldwide leader in wireless medicine and the delivery of health information in order to improve quality of life and reduced cost of care, we ask ourselves how we can best leverage our technology in order to create new revenue opportunities. The justification for remote monitoring solution could not be more evident.

The pressure on healthcare systems to lower overall cost of care continues to amount. Given the proven effectiveness of remote monitoring and in particular, remote cardiac monitoring, we believe we are in some of the most attractive markets today.

In terms of other remote monitoring markets to enter or develop, we’ve had a few internal projects that are now starting to mature. On our last earnings call, I was asked about our activity with at-home monitoring of INR testing. This is the primary diagnostic measurement used to help regulate anti-coagulation medications. Although it’s too soon to make revenue predictions, we are coming out of a pilot base and beginning to deploy this service offering nationwide. In entering the INR market, we are able to leverage a good portion of our current infrastructure including sales and marketing.

During the quarter, we also entered into an alliance with Wellbridge Health, a care management company focused on reducing unnecessary hospital readmission and emergency room visits resulting from congestive heart failure. CHF currently affects approximately 5.8 million adults in the United States population and estimated $32 billion each year and accounts for the highest hospital readmission rate. 75% of which are potentially avoidable according to Medicare Payment Advisory Commission. As such, it makes sense for us to invest time and resources to help commercialize Wellbridge’s rather unique approach to this healthcare challenge.

So what can you expect to see from us in 2014? We will continue to build on the comprehensive approach to the market in patient services by adding additional products and services. We will seek to maximize our opportunity with expanded payer coverage, continue to consolidate lifetime assets where appropriate, add service lines to our research services business and establish our European footprint.

To summarize, we have never been better positioned to compete and have an outstanding team in place to execute on our goals, expect us to develop exciting technologies and use these for remote monitoring. We believe we're just scratching the surface in advanced opportunity to bring down cost and improve patient care through the use of telemetry.

Finally, I would again like to thank all of those at the company who helped deliver our highest EBITDA in over four years and year-over-year revenue growth of 11% during the fourth quarter to close out an excellent year. I would also like to welcome the people from the Mednet organization to the BioTelemetry team. Let’s all do what we need to do to ensure another spectacular year in 2014.

So with that, we will pause and open the call to questions, operator, we are ready for our first question.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Brooks O'Neil of Dougherty and Company.

Brooks O'Neil - Dougherty and Company

I have a couple questions. The first I'd like to ask you a little bit about Mednet. It looks to me, if I'm doing the math correctly, like they might have had higher, let's call it, EBITDA margins, than your Company had, Joe. So, A, is that true? B, what impact do you think that could have on your results in 2014? And is there anything you can learn from their operation that you think will be helpful to you going forward?

Joseph Capper

Yeah, Heather, you can expand more on the margin. As I recall, we have higher gross margin -- slightly higher EBITDA margin. And obviously they aren't carrying some of the burdens that we were carrying. What can we learn? Brooks, number of 45 million we are comfortable with, and this is kind of an annualized number. Obviously there might be some more opportunity there, but that’s the number we are most comfortable for today.

Brooks O'Neil - Dougherty and Company

And approximately $25 million of revenue, is that right?

Joseph Capper

Yeah, that’s about right. Now that’s about what their run rate was. That number is… you got to expect when you have kind of integrations like this that you may have a little bit of customer attrition, we were or wildly focused on maintaining as many customers as possible. We think we’re going to be successful at that, but these lifetime acquisitions and integrations that I have done in the past, you tend to have a little bit of customer attrition.

So that number is still probably be a pretty good number though because we may have some upside in terms of optimizing payer contracts and things like that. So we are pretty comfortable with that number as well.

Brooks O'Neil - Dougherty and Company

Let me ask you a different question. Could you give us a little update on how things are going with some of the new payors you signed up in 2013? I'm thinking most specifically about United and Kaiser. And then I'm just curious if you have any comments about the outlook for some of the payors that we know are still out there that have yet to make a positive coverage decision?

Joseph Capper

So with United, we have pulled it through quite well and that was the big one. If you recall the number of Covertlife [ph], I think, that is the largest or second largest in the country, might be slightly lower than WellPoint now. But that was the big one for us and we’re doing a really good job pulling that through. That’s helping drive the volume growth that we’re talking about. The Kaiser agreement was much smaller and we implemented that in November. We had -- that’s going okay for us as well, it’s just not as big a deal, it’s not going to move the needle nearly as much as the United one with but is moving the needle.

And the other big one that we still would like to get out there obviously is WellPoint which is WellPoint Anthem is the largest Blue in the Blue’s network. I think there’s 39 members, we probably 10 or 11 of them. So we still have a lot of opportunity to expand within the Blue’s network and obviously if we can get 800-pound gorilla it will be tremendous. Outside the Blues we’ve done a pretty good job in terms of payer coverage. Again, that’s probably… if you look at what could drive growth, near term low-hanging fruit, if you will, additional payer coverage is where it’s at and obviously there’s -- the big one is still left out there. And the new contracts that we have, we are always signing new contracts. They don’t talk about them all the time. In fact, we signed two more Blues that we thought was significant enough to mention because of our strategy to surround that network. They are not the biggest ones, but probably picked up about 2 million lives in the process, 2 million cover lives. So when you compare that it’s like 70 million to 100 million at United depending on what number you use, it’s relatively small but is progress.

Brooks O'Neil - Dougherty and Company

Sure. That’s great. And then lastly, I'm curious. Obviously Heather mentioned the changes in research services. Can you say anything about what you think you might be able to do to revitalize the sales process over there or what's going on now?

Joseph Capper

Yeah. It’s a healthy business, it just didn’t grow, we had expected like $3 million to $4 million of growth out of business, the first year we had it. In hind sight, that was probably a little too optimistic for the first year of owning a new company like that, and they ended up to be more flattish than we had anticipated. Couple of dynamics in the industry. Some of the larger pharmaceutical companies are contracting the fewer and fewer providers. So if you have more services, it tends to position you better. Our win rate is still as good as it used to be. We probably bid on slightly less -- fewer pieces of business in 2013 than we did in 2012 and that’s something that we’re rectifying and lot of these basic salesmanship and leadership things that we’ve made some modifications to. But I think strategically most important things for us to do is get more competitive in the marketplace. So one of those things is to add some additional services lines, you will hear us talk about that hopefully in the near future, and establish a better footprint from a logistics and project management business development standpoint primarily in Europe but also in Asia, but Europe is where you really got to have a better presence.

Operator

Thank you. Our next question comes from Alex Silverman from the Special Situations Fund. Your line is open.

Alex Silverman - Special Situations Fund

Hi. Can you… I think you mentioned in your prepared remarks about new agreements signed during the quarter that at least one of them was an INR contract. Can you give us a little bit of info around what was signed and even if you can't name names, what it looks like?

Joseph Capper

Yeah. What we’re doing is just -- first of all INR was part of the United agreement and what we’re doing is whenever we sign new agreement, we’re attempting more so than in the past to list all the services that we offer and INR being one of those services, so that’s part of it. And the other thing we are trying to do is modify as many existing ones as possible to add INR on all of our new contracts we included. So as we roll it out in any healthcare services or healthcare products business, one of the biggest challenges you’re going to have is do you have payer coverage rate. So that’s always a first push I can get from our sales organization. We do not have INR on this particular contract. When we have a lot of payer contracts in the institution, we can see they pulled back and amendment to add this product which takes some time, but so far it’s going pretty well.

Alex Silverman - Special Situations Fund

How many, rough ballpark, lives do you have covered of those that you had covered for cardiac?

Joseph Capper

I couldn’t tell you that. I apologize. We’ll get you that information.

Alex Silverman - Special Situations Fund

That’s fine, but just to dig in for a minute on your 2014 guidance, 20% growth is roughly $155 million, which would be roughly what Mednet should add. I can assume that is a baseline with growth on top of it from United and other patient services, plus your research service business?

Joseph Capper

Yeah. We’re trying to give you guys some guides because we know we haven’t giving much in the past. So we debated that number a lot. We were going to give you a range and if I give you a number I want to hit it. And if you’re correct our 2013 number and then net 2013 number for the Medicare cut, now you have to pull back off of that 1/1.30. So the 20% already has some kind of mid-to-high single-digit growth built into it. You have my word. We’ll move heaven and earth to try to get more.

Alex Silverman - Special Situations Fund

Okay. And then the EBITDA margin that you think, you’ll be slightly below the 2013 EBITDA margin, Heather that’s 13, last year was 13%?

Heather Getz

Yeah. That’s correct and that’s really as a result of the Medicare reduction. Again, that’s off rate to the bottom line.

Alex Silverman - Special Situations Fund

Totally I got it. I just want to make sure we’re talking about the same thing.

Heather Getz

Yeah. Same thing.

Operator

Thank you. Our next question comes from Jan Wald of Benchmark. Your question please.

Jan Wald – Benchmark

Good afternoon, everyone and congratulations on the quarter, you surprised us. I guess one of the things that I wanted to really ask about what is, in patient’s management you said services INR is one of them and in the past you thought maybe the a couple of some – what other services might you add besides INR?

Joseph Capper

There is a lot, Jan, to kind of present well when you look at them in terms of being able to eliminate costs and drive better care with the application of remote monitoring technology and you could brainstorm about those. The areas that we kind of invested time and money in are INR and now CHF because we can see a meaningful business opportunity in terms of whether there is reimbursement set for INR and there is a market for it. We are not coming in and reinventing the wheel. We think we have some intriguing ideas on how to create competitive advantage in that market and translate that into cost advantage for customers and other types of them [ph]. And then CHF obviously has been such a hot topic with better cares, recent change in how we are reimbursed for readmissions, specifically not reimbursement for readmissions within 30 days of discharge for patients with congestive heart failure. So there has been a demand for that as well.

We have some great partnerships in the marketplace that we think we can capitalize on to take advantage of that. Some of the other products that we like are around three [ph] and you can go on and on. You tend to focus on the chronic care conditions, because they’re ones that are really costing the most money in the marketplace. If you can create ways to introduce the type of monitoring technology we have to improve the service level and eliminate cost we will do that. But a little bit more difficult because you are now talking about more market creation, more kind of softening the beach and business development work, it takes longer and longer to do. We’re not that big yet, right? So really my approach to this is - is there a benefit to the market? Is it sellable? And can we create some revenue and margin opportunity for the company?

Jan Wald – Benchmark

So going forward for the next year to two years we should see you more or less focus on INR, on CHF. And seeing what you do with those businesses, with the other opportunities, like diabetes, further out and waiting for a bit. Is that the right way to think about this?

Joseph Capper

I would but we are also doing some kind of development work in other product areas. It may be even closer to cardiac monitoring, different uses of cardiac monitoring that we’re just not prepared to talk about today. I can’t tell you everything we’re doing, Jan.

Jan Wald – Benchmark

And in terms of the INR, I was going to ask how you were going to roll that out. But I guess the way to think about that is that you are going to try to get the current customers you have to use it. And as you go through the customers, you're going to try to get them to sign the contracts. There is not a marketing effort outside of those two kinds of things. Is that true?

Joseph Capper

No. I really can’t. No, not today. It gives us ability again to leverage a spend that we’ve already made on our sales and marketing infrastructure and then we can add to the bag. Possibly, cross-sell opportunity to consumers, that’s yet to be developed, we’ll see but right now the primary go to market is to get physicians to recommend the service to their patients.

Jan Wald – Benchmark

Okay. And in terms of research services, you've said in the past that you have to get into Europe. You've said that there are research lines that you want to add. Where do you see that business going? Do you see it continuing to grow? Is that Cardiac-core lab where you're adding different imaging capabilities and different analytical tools to that? Or do you see yourself expanding into data management and those kind of things?

Joseph Capper

Yeah. I think you just hit the nail on the head, Jan, probably in order of priority, imaging would be first. Other ePRO or [indiscernible] type of technologies are hot properties right now as well for data management. They are little too hot for my pace, but there are good service lines that complement what we’re building. A little bit further I think is respiratory but it’s not uncommon to see respiratory and Cardiac core labs partner together as well. Imaging would probably top of my list.

Operator

Thank you. Our next question comes from Bruce Jackson of Lake Street Capital. Your line is open.

Bruce Jackson - Lake Street Capital

Hi. Thanks for taking my questions. First, I want to focus on the CardioKey products. So if I heard you properly, this is a patch form factor and it’s going to launch in Q2, is that right?

Joseph Capper

Yeah. Well, I hoped to launch it somewhere around Q2. That’s the timetable today.

Bruce Jackson - Lake Street Capital

Okay. Great.

Joseph Capper

Let me explain a little bit more about that. We would do an awful lot of things in the company right now and with the acquisition of Mednet, it was a little bit more opportunistic than it may have seen. So there is some things that you have to divert your technology teams to integration which may cause slippage in projects by cardio people. We’re going to try them on schedule if that is possible, but as I’m making a choice between a maximizing my opportunity integrating and acquisition just made and bringing the new product to market, we’re logically where I’m going to end up and that’s kind of the way we’re managing internal resources right now. We can get external resources to help, we’ll do it, but CardioKey is one that we need somebody internal focus to work on and while it’s an attractive market for us, it’s going to be a product line, additional expansion, it’s not going to change the world.

Bruce Jackson - Lake Street Capital

Okay. Okay, got it. And then the first version is going to be a Holter and the IMEC enhanced version if would follow after that, is that correct?

Joseph Capper

Yes. That’s correct. And that’s a telemetry product.

Bruce Jackson - Lake Street Capital

Great. And then are you still anticipating getting some gross margin advantage with this new form factor?

Joseph Capper

Yeah.

Bruce Jackson - Lake Street Capital

Okay. Would you care to quantify that?

Heather Getz

No.

Joseph Capper

No, not at this point.

Heather Getz

Not right now.

Bruce Jackson - Lake Street Capital

Okay.

Heather Getz

It’s going to come in more towards the end of the year, Bruce. So it’s really not going to impact 2014. So as we get closer we’ll be able to give more intel on it, but it will definitely have an impact.

Bruce Jackson - Lake Street Capital

Okay. Then did Mednet contribute any revenue in this quarter?

Heather Getz

In 2013, no.

Bruce Jackson - Lake Street Capital

Okay.

Heather Getz

It will in the first quarter of 2014.

Bruce Jackson - Lake Street Capital

Okay. And then the $25 million that you estimate that you put out there, does that include both the Medicare haircut?

Heather Getz

Yes.

Bruce Jackson - Lake Street Capital

Did INR contribute anything in the quarter?

Joseph Capper

De minimis (ph), very small.

Bruce Jackson - Lake Street Capital

Very small, okay. Finally, with the Wellbridge collaboration that you've got going, how would you see that unfolding over the course of 2014? So talk to us a little bit about your relationship, your involvement with that company, and what are some of the milestones that you will be looking for in terms of deciding whether or not to take this thing out to a broader audience?

Joseph Capper

It’s relatively early stage, they are in beginning of pilot phases where the few large healthcare systems and reputable healthcare systems who are very intrigued by the technology as are we. And we need those pilots to sort of unfold and look at the findings from them before we talk about next milestone. Our initial relationship was in the form of investment that converts to equity based on certain things and we’re just – I don’t want to elaborate on all of that right now, but that’s sort of where we stand out. There’s not as much that we can add to them yet, as soon as the pilot phase is over there is a lot of inherent capabilities in BioTelemetry that will help accelerate their plan.

Bruce Jackson - Lake Street Capital

Okay. Great. Thank you very much.

Joseph Capper

Great. Thanks Bruce.

Heather Getz

Thanks Bruce.

Operator

Thank you. Our next question comes from Dan Trang of Stonegate Securities. Your line is open.

Dan Trang - Stonegate Securities

Hi all. Congrats on the great quarter. I was wondering if you could provide some color behind, I think, Joe, you mentioned that the remote monitoring industry was consolidating. With everything going on with the Mednet acquisition, are you guys talking with anybody else? Is there anything else going on regarding acquisitions?

Joseph Capper

Well. I just wouldn’t be able to elaborate much on anyhow. Dan, I would just say that in general, I think, that there remains opportunities to do more consolidating in the industry. It’s been pretty… we started to get a little disbursed over the last few years and now starting to consolidate a little bit more. Obviously, when you have reimbursement reductions it’s going to help to be a bigger company where it can also come that with scale and through diversifications. So some of the other guys probably are challenged by it, but I think there is a decent amount of opportunity.

Dan Trang - Stonegate Securities

Okay. Regarding the big elephant you're hunting, WellPoint, can you give any color behind any discussions or progress, if any, that you've had pursuing WellPoint?

Joseph Capper

I think I cannot, Dan. I can only tell you that we’re about annoying as we can be. We are constantly providing updates trying to keep them informed of what’s going on. I think most people in the industry are fairly moved by the sizable return on investment as evident by the claims data analysis, which was just recently published in a peer-review journal and it’s all been provided to them, they kind of keep things close to that. Again, we are staying on top of them as much as possible and try to push the things hard, but I don’t want to give you a forecast or prognosis. I think we’re working as hard as we can.

Dan Trang - Stonegate Securities

Great.

Joseph Capper

Sometimes it defies logic that people aren’t paying for things that actually save their money but if you are large bureaucracies.

Dan Trang - Stonegate Securities

Okay. All right. Thank you.

Joseph Capper

Great. Thank you.

Operator

Thank you. We have a follow-up question from Alex Silverman, Special Situations Fund. Your line is open.

Alex Silverman - Special Situations Fund

Can you help us think about litigation expenses and where you stand with ScottCare and whatever else you might have in your plate?

Joseph Capper

Yeah. I think the majority of the patent litigation expenses are behind us.

Heather Getz

Yeah. We’ll have some in Q1.

Joseph Capper

We’ll have some in Q1, but the majority of them are behind us. I would say that our position in the ScottCare case was powerfully enhanced by the resolution with Mednet and we’ll see how that one goes, but I don’t anticipate racking up a lot of newer expenses there. That’s most of it.

Heather Getz

Yeah.

Alex Silverman, Special Situations Fund.

Okay. That’s helpful. Thank you very much.

Heather Getz

Sure. Yeah.

Operator

Thank you. At this time, I would like to turn the call back over to Mr. Capper for any closing remarks.

Joseph Capper

Thanks operator, thank you everybody for your continued support and interest in the company. We can close the call and we will speak to you at the end of next quarter. Have a great evening. Operator, that concludes the call.

Operator

Thank you, sir. Ladies and gentlemen, that does conclude your program. You may disconnect your lines at this time. Have a great day. If you joined the conference late today you may listen to the conference call via digital replay which will be available through the investor information section of the BioTelemetry website at www.bioteleinc.com until Wednesday March 12th, 2014. Have a great evening ladies and gentlemen.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

BioTelemetry, Inc. (BEAT): FQ3 EPS of $0.05 beats by $0.09. Revenue of $33.1M beats by $0.84M.